Fonterra's delayed disclosure at issue

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OPINION:
DCD is the agriculture chemical dicyandiamide (try saying that aloud and really scare yourself), residues of which were found by Fonterra during sample testing of its dairy products last September.

Rowarth may be right. But despite her view and the prime minister and Fonterra chief executive Theo Spierings decrying the trade risk from the ensuing fuss that has broken out since last week's orchestrated official announcement some four months after the discovery, Fonterra's disclosure rep is taking another beating.

Four years on from the baby melamine poisoning scandal in China, in which Fonterra had major exposure through its 43 per cent shareholding in the SanLu company at the centre of the tragedy, the company is again involved in a debate involving food safety and a disclosure gap that niggles.

DCD has been used by some Kiwi farmers for seven years as a farmland treatment, and melamine was added to Chinese-farmed raw milk by Chinese crooks. Neither action is directly Fonterra's fault.

But the common denominator is the time lapse between discovery and announcement, and the orchestrated presentation of the facts. Both cases saw the Government at the forefront.

In the DCD case, smack in the middle of the September DCD residue discovery and last week's announcement was an IPO, which on November 30 saw overseas and local investors snap up $525 million of units in Fonterra's farmer-owned shares. And, as happened in the SanLu scandal, Fonterra, normally masterful at spin, has come out claiming surprise when suspicion and questions surface.

A public relations spokesman told Fairfax the DCD issue was not delayed until after the IPO to his knowledge.

He said if there had been any risk of a food safety issue with the DCD residue discovery, the company would have had to declare it.

He rejected the observation that Fonterra had been tardy in its disclosures.

Fonterra found DCD residues "100 times less than European daily allowances", the spokesman said. This is why Fonterra said nothing in September.

The company figured that, with no international standard for DCD residues in food, there was nevertheless a trade risk, and international standards were needed. Fonterra decided to "take the lead" and sit down with agriculture ministry officials and fertiliser companies to nut out the issue, he said. It's up to the market now to digest that explanation - maybe with a grain of salt.